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Being denied approval for a credit card you just applied for can be frustrating, especially since credit cards can be a very useful tool to help fund your lifestyle, giving you the ability to earn rewards and welcome bonuses along the way. It is essential, however, that people pay off their balances on time and in full to avoid high interest rates or damage to their credit score.
If you need a new credit card and aren’t sure how to proceed after you’ve been denied approval, don’t despair. Below, Select explains how your credit score is affected by your card application and what cardholders should do after they are declined.
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What happens when you apply for a credit card and get declined?
When you apply for a credit card, issuers examine your creditworthiness by carrying out a thorough investigation of your credit score, or, in other words, pulling your credit report from one of three credit bureaus, Experian, Equifax or TransUnion. According to FICOa thorough investigation can lower your credit score by about five points.
While a serious inquiry will stay on your credit report for two years, FICO only includes them in calculating your credit score for up to one year. It should be noted that new requests represent only 10% of new credit category of your credit score, and regardless of whether you are approved or denied for a credit card, the serious inquiry itself will show up on your report.
If you’re actively looking for a new credit card, you might want to avoid applying for multiple cards at once. Since each request leads to an additional in-depth investigation of your credit report, this could indicate to lenders that you are a potentially risky borrower.
Under the Equal Credit Opportunity Act, creditors have 60 days to provide you with a specific reason why you were denied a line of credit. This is called an adverse action letter. You may be rejected for a variety of factors, such as having a low income, a short credit history, or too much credit card debt.
What can you do after being refused?
After you receive a notice explaining why you were rejected, you’ll want to focus on improving your credit score or finding new credit options, says Matt Schulz, chief credit analyst at LendingTree.
Sites like Select provide information on the types of credit scores you need to qualify for certain cards, so you’ll want to do your research before applying for another. Remember that you can always work on improve your credit score by making payments on time and in full.
Consider a secured credit card
If your credit history is too short or you have a bad credit rating, you may want to consider applying for a secured credit card. A secured credit card requires cardholders to put down a deposit, which serves as security if they are ever able to make payments.
the Discover it® Secure credit card is one such option, requiring a $200 security deposit. Beginning seven months from account opening, Discover will automatically review the cardholder’s account to determine if they are eligible to switch to an unsecured card.
On Discover’s secure site
Earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases every quarter. Plus, automatically earn unlimited 1% cash back on all other purchases.
Discover will match any Cash Back you have earned at the end of your first year
Balance Transfer Fee
3% initial balance transfer fee, up to 5% fee on future balance transfers (see terms)*
Foreign transaction fees
Call the bank and negotiate
You can also try to negotiate approval by calling the card issuer and speaking to a customer service representative. Note that some issuers may ask you to send proof of income, your social security information, and your address to verify your identity and information.
There are a number of reasons why you may have been refused a new card, even if your credit score is high: you may have too much credit with this bank or the bank may have a limit on the number of accounts that it will issue a customer. If you call the bank’s review line and give them a detailed and compelling case as to why you should be approved (perhaps you are a loyal, long-time customer with an excellent history of on-time payments) , they may be able to push your application through.
Your income may be higher than you think
You might also consider including your spouse’s or spouse’s income in your application, says Schulz. In 2013, the Consumer Financial Protection Bureau made changes to the Credit Card Accountability Responsibility and Disclosure Act, or CARD Act, a 2009 bill passed by the Obama administration that cracked down on predatory practices by credit card companies. These changes allowed people over 21 to include their loved one’s income on their credit card application.
Consumers over 21 are also allowed to include third-party earnings in their application as long as they have a “reasonable expectation of access” to those earnings, Schulz says.
You can also include investment returns, social security payments, retirement distributions, and income from rental property on your application to increase your chances of approval.
Use a credit monitoring service
Finally, you’ll want to take a look at your credit report to make sure the issuer isn’t making a loan decision based on an error or other misinformation that might be on your credit report. Each of the three major credit bureaus – Experian, Equifax and TransUnion – is required to provide consumers with at least one free credit report per year, which you can access through AnnualCreditReport.com.
Credit monitoring services can also track changes to your credit report and credit score and alert you to suspicious activity. Although free services usually don’t offer this option, you’ll need to opt for a paid credit monitoring service to handle reports from all three bureaus – fees can range from $8.99 to $39.95 per month depending on which one. That you are going. with.
Select ranked Capital One CreditWise® as the best free credit monitoring service and IdentityForce® UltraSecure and UltraSecure+Credit as the highest paid service. Both make it easier for consumers to stay on top of their credit scores and credit reports, offering different features to ensure there are no surprises the next time they want to apply for a new one. credit card.
Information on CreditWise was independently collected by CNBC and was not reviewed or provided by the company prior to publication.
Credit bureaus monitored
Credit score model used
Dark web analysis
On the Identity Force secure site
UltraSecure+Credit Individual starts at $139.90/year and UltraSecure+Credit Family at $209/year. Click “Learn more” for more details.
Credit bureaus monitored
Experian, Equifax and TransUnion
Credit score model used
Dark web analysis
Yes, $1 million for all plans
Conditions apply. To learn more about IdentityForce®, visit their website or call 855-979-1118.
For Discover it® secure credit card rates and fees, click here.
Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.